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Note 4 - Fair-value Measurements
 6 Months Ended
Jun. 30, 2025
Notes to Financial Statements  
Fair Value Disclosures [Text Block]

Note 4—Fair-Value Measurements

 

Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability, an exit price, in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The accounting standard establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs, where available. The following summarizes the three levels of inputs required:

 

Level 1—Observable inputs for identical assets or liabilities, such as quoted prices in active markets;

 

Level 2—Inputs other than quoted prices in active markets that are either directly or indirectly observable; and

 

Level 3—Unobservable inputs in which little or no market data exists, therefore they are developed using estimates and assumptions developed by us, which reflect those that a market participant would use.

 

We review the fair value hierarchy classification on a quarterly basis. Changes in the observability of valuation inputs may result in a reclassification of levels for certain securities within the fair value hierarchy. There have been no transfers of assets or liabilities between fair value measurement classifications during the six months ended June 30, 2025.

 

Our fair value hierarchy for our financial assets and liabilities measured at fair value on a recurring basis are as follows:

 

   

June 30, 2025

  
   

Level 1

    

Level 3

    

Total

  
   

(In thousands)

  

Assets:

                        

Cash and cash equivalents:

                        

Certificate of deposit classified as non-current restricted investments

   $ 1,054     $ —     $ 1,054  

Short-term investment:

                        

Money-market funds

     26,840       —       26,840  

Total Assets

   $ 27,894     $ —     $ 27,894  
                         

Liabilities:

                        

Share-settled liability

   $ —     $ (7,627 )   $ (7,627 )

Term Loan

                        

Call and put options derivative (1)

     —       113       113  

2029 Notes:

                        

2029 Notes conversion option derivative

     —       (15,020 )     (15,020 )

Total Liabilities

   $ —     $ (22,534 )   $ (22,534 )

 

 

(1)

While the Term Loan is recorded as a liability, the embedded call and put options that have been identified as requiring bifurcation are recognized as a net embedded derivative asset reflected as a component of the Term Loan on the balance sheet.

 

   

December 31, 2024

  
   

Level 1

    

Level 3

    

Total

  
   

(In thousands)

  

Assets:

                        

Cash and cash equivalents:

                        

Certificate of deposit classified as non-current restricted investments

   $ 1,054     $ —     $ 1,054  

Short-term investment:

                        

Money-market funds

     86,732       —       86,732  

Total Assets

   $ 87,786     $ —     $ 87,786  
                         

Liabilities:

                        

Term Loan

                        

Call and put options derivative (1)

   $ —     $ 235     $ 235  

Total Liabilities

   $ —     $ 235     $ 235  

 

 

(1)

While the Term Loan is recorded as a liability, the embedded call and put options that have been identified as requiring bifurcation are recognized as a net embedded derivative asset reflected as a component of the Term Loan on the balance sheet.

 

Cash held in demand deposit accounts of $1.9 million and $3.4 million is excluded from our fair-value hierarchy disclosure as of June 30, 2025 and December 31, 2024, respectively. The carrying amounts reported in the accompanying condensed consolidated balance sheets for receivables, accounts payable and accrued liabilities, and other current monetary assets and liabilities approximate fair value.

 

All of our investments, which are classified as Level 1 assets, are short-term and held in our name. Money market funds are classified as available-for-sale.

 

Our share-settled liability and embedded derivatives are classified as Level 3 assets and liabilities. Our embedded derivatives are grouped with their related host contract as a net liability on our condensed consolidated balance sheet. (For further details see “Note 6 – Debt”).

 

The fair value of our share-settled liability was determined using the Monte Carlo model assuming a yield volatility of 137%, a stock price floor of $2.50 and a fixed conversion price of $6.18. 

 

The fair value of our embedded derivatives were determined using both the Lattice and Discounted Cash Flow models with the following key assumptions:

 

   

June 30,

    

December 31,

  
   

2025

    

2024

  

Term Loan derivative

                
                 

Interest comprised of:

                

SOFR benchmark rate

     3.04 - 4.08 %     3.91 - 4.30 %

Securitized discount rate

     11.80 %     13.16 %

Yield volatility

     26 %     21 %

Probability weighted term (in years)

     1.9       3.4  

 

Changes in valuation assumptions could have a significant impact on our Term Loan derivative. The Company can provide no assurance that changes in yield would not be significant in the future.

 

   

June 30,

  
   

2025

  

2029 Notes conversion option derivative

        
         

Stock price (per share)

   $ 3.00  

Unsecuritized discount rate

     18.88 %

Risk-free rate

     3.66 %

Stock price volatility

     70 %

Dividend yield

     — %

Term (in years)

     4.0  

 

Changes in valuation assumptions could have a significant impact on the 2029 Note conversion option derivative. The Company can provide no assurance that changes in yield or in our stock price would not have a significant impact on the derivative in the future. An increase in our stock price volatility could increase the valuation of the 2029 Note conversion option derivative, whereas an increase in interest rates could decrease the valuation of the 2029 Note conversion option derivative.

 

The following table sets forth a summary of changes in the fair value of Level 3 liabilities for the six months ended June 30, 2025:

 

   

Balance as of

                    

Balance as of

  
   

December 31,

                    

June 30,

  
   

2024

    

Additions

    

Change in Fair Value

    

2025

  
   

(In thousands)

  

Liabilities:

                                

Share-settled liability

   $ —     $ (7,627 )   $ —     $ (7,627 )

Term Loan

                                

Call and put options derivative

     235       -       (122 )     113  

2029 Notes:

                                

2029 Notes conversion option derivative

     —       (15,020 )     —       (15,020 )

Total Liabilities

   $ 235     $ (22,647 )   $ (122 )   $ (22,534 )